The better small- and mid-cap funds often come with a hitch: They close to new investors in an effort to protect their managers' ability to maintain their strategies and in turn, to protect performance. In extreme cases, funds close their doors to all new money, even from existing shareholders. Left unchecked, runaway asset growth has the potential to force a manager to take smaller positions or venture into larger companies in order to put cash to work. Both tacks can cause performance to diminish.
Indeed, in its announcement of the April 2 closing of T. Rowe Price International Discovery (PRIDX), the fund's manager, Justin Thomson, noted that "maintaining the integrity of the overall strategy" motivated the decision to close. The foreign small-/mid-cap growth fund's assets, at more than $9 billion, make it one of the largest foreign small-/mid-cap international funds of any style. (Only Oppenheimer International Small-Mid Company (OSMAX), DFA International Small Cap Value (DISVX), and DFA International Small Company (DFISX) are larger, and the latter two funds employ disciplined, rules-based approaches that should allow them to handle more in assets than more active funds.) The asset growth at T. Rowe Price International Discovery really picked up steam following its scorching 39% gain last year.
Christine Benz does not own shares in any of the securities mentioned above. Find out about Morningstar's editorial policies.